Annuity distribution with no 1099-R?

[DonB]

Client purchased a non-qualified annuity in 2015 and receiver three distributions in 2015. No 1099-R has been received and the agent who sold the policy says it is non-taxable and no 1099-R would be sent in this case. This makes no sense as there should be some earnings to be taxed, and even if not, I thought they always sent out a 1099-R. Am I wrong?

[Burke]

He bought it in 2015, and pulled it out in 2015? Do you have some figures? There would have been surrender charges, I believe, and he may have a loss.

[DonB]

He bought it in 2015, and pulled it out in 2015? Do you have some figures? There would have been surrender charges, I believe, and he may have a loss.

He did not pull out. He received annuity payments. of $24,000. Purchase price was around $700,000.

[JoshinNC]

If he didn't annuitize

and just took distributions then it's a return of principal. Non-taxable.

[ATSMAN]

Here is the deal with non qualified annuities as far as I know:

Withdrawals

Withdrawals of earnings from a nonqualified annuity are fully taxable at ordinary income tax rates. Unless the annuity was purchased before August 14, 1982, the earnings are considered withdrawn first and are therefore subject to taxation. All withdrawals will be fully taxable as ordinary income until the account value reaches the initial amount invested. Because annuity income is taxable at ordinary income tax rates, you do not receive the benefit of lower capital gains tax rates. Also, if you are under age 59 1/2 when you make the withdrawal, you may be assessed a 10% penalty on any taxable earnings.

Annuitized Payments

If you annuitize a nonqualified annuity, a portion of your payment will be considered a return of premium and will not be subject to ordinary income tax. The amount that is taxable will be determined at the time you elect to annuitize the policy. A calculation will be made by the insurance company to determine the “exclusion ratio,” which will determine the percentage of each payment that will be excluded from income tax.

[DonB]

My main concern is the lack of a 1099-R; it is my belief that one is always issued. I am a little worried something is not right.

[Burke]

Bypass the agent and talk directly to the company. ATSMAN is right about the taxation of the annuity. There should be some earnings involved.

[taxea]

The client must have a document that explains how the distributions of the annuity work and should have received a 1099. It is the clients responsibility to provide you with the document needed to do the return correctly. You should not have to be chasing after the information.

[JoshinNC]

Not if its a variable annuity

Bypass the agent and talk directly to the company. ATSMAN is right about the taxation of the annuity. There should be some earnings involved.

He could have lost money on the sub-accounts, thus no earnings and no 1099.

[Burke]

It's possible he did not have any earnings. But he won't know until he checks a little further. Custodian is required to report on 1099-R any distribution over $10. See instructions for filing form 1099-R. He should have received a 1099-R showing gross distributions of $24,000, and taxable amount "zero" if this were the case. And there is a box to show contributions. Have the TP or sales agent provide the info. (The contract will state if it is a variable annuity.)